Six Types of Transactions that a Merchant be Aware of
You’re a merchant and are, therefore, expected to understand the diverse intricacies associated with online transactions. If you know them, you can save on account of paying a fee that you need to pay while processing the refund for the transaction or transaction.
It’s amply clear that when you apply these concepts of transactions, in the right sense, it will result in overall customer satisfaction. We’ll mention here the diverse types of online transactions.
The various terminologies to refer to the types of online transactions discussed are distinct in each case of the processor. And, it’s, therefore, distinct from direct merchant accounts associated with third parties.
Variously known as card authorization, pre-authorization, Preauth or authorization Hold Auth, Authorization is one of the Types of Online Transactions which constitutes a request to keep before the transaction materializes.
Authorization is a sort of transaction that brings transaction that is outstanding in a cardholder’s account to be settled on a designated date later. When the card-issuing bank (the issuer) gives consent to the authorization, permission to keep the requested fund on hold is permitted.
The funds are allocated and can be kept for a duration of time from one to nine days. It can be held up to 30 days if settled immediately. The principal reason to keep an authorization on hold is to make sure there are enough funds available to execute the transaction. And, that all the information provided is accurate and that the issuer gives their consent to charge.
Also called a Capture, a Settle transaction is the closing of the authorization process leading to funding settlement. The transaction settlement can materialize immediately or may be processed by batch a single time a day. You can decide where you should make the settlement immediately or by bay depending on the quality attribute of the product/service and the customer-base quality.
The option to get the daily charges processed all in one go allows the merchant to cancel/void any transaction done recently. But if you get settled immediately, the cycle of the settlement is cut short and the transaction cannot be voided. Therefore, any completed transaction has to be refunded if need be.
A sale transaction comprises two transactions, namely authorization and settle. Determining between the two ways of doing things is mainly dependent on the nature of your business. If you deal in Forex brokerage involving large deposits, changing from sale processing to auth/settle will escalate the cost of processing by adding the transaction fee. But it will give your team that looks after risk and the processor extra time to review the legitimacy of transactions, consult one another rule out handling refunds in a rush afterward when the transaction could be discarded in the first instance.
A void transaction is one canceled by a vendor or merchant before settlement through the consumer’s credit card or debit card account happens. The transaction apprises the processor’s gateway about your not willing to move on and settle the funds. Normally, the processor should then inform the transacting bank to release funds held during the authorization. However, a few acquiring banks do not offer the processors with this option. In such a case, the settle transaction will not be sent and funds will be released only the hold expired.
If you work with the ‘sale method’ you may still have the ability to void the transaction completely. It depends on how your processor and the banks are related. If they’re working live, no void is possible to enforce the approved authorization. It is immediately followed by a settle transaction. In some cases, banks want to examine the batch of all authorizations sent to them at a particular hour (afternoon) on the designated date. In such a case, the transaction can still be voided as the settlement is not included in the broadcast.
If the is an issue with the transaction, it can be voided even though it has not been settled. As in such a case, the transaction is pending and not been cleared, it implies the sale cannot be allowed to execute.
This sort of online transaction is also called a credit return or credit. It involves funds returned to the cardholder form the merchant account once the transaction was done and settled.
A refund transaction is executed according to the case, according to the return policy and your refund. It’s probable to refund the amount partly but not more than exceeding the original amount charged and should be returned in the same case as the initial charge was redeemed. In case of a transaction was refunded, it cannot be charged again by the cardholder.
Note that you can only execute refund transactions in a settled or settling status. If you wish to execute a particular transaction with an authorized, settle, or pending settled status, you’re eligible to issue avoid.
6. Original credit transaction (OCT)
Formerly known as CFT, the OCT is Types of Online Transactions which is meant for designated merchants who are looking for the option to issue a credit towards a card that necessarily did not result in the transaction or is entitled to more than the amount charged as many as 50,000 units day. A classic example is the Visa card.
An OCT is a mechanism in the MasterCard and Visa. By this, firms can make customers pay to cardholder beneficiaries.
When the card company MasterCard or Visa debits the merchant account and credits the cardholders, the transaction is said to be completed.
The principal industries that are permitted to execute OCT sort of online transaction are forex merchants and gaming industry entities. Refunds are looked down on by the banks involved in acquisition as any return of funds are absorbed wither it is a winning or a withdrawal. The benefit for customers is that you cannot rule out bank charges and landing fees to the beneficiary.
Merchants would, however, like to issue refunds to protect this transaction from being charged back as the OCT does not provide such protection. Usually, the acquirers will allow the highest refund at a 5% ratio to be issued on these accounts.
As a professional online merchant, you should be able to understand the intricacies therein. Knowing them will help you rule out avoidable mistakes. It’ll also reduce the odds of committing mistakes that may prove costly. Further, it may also result in potential legal tangles. These 6 Types of Online Transactions are very important to know in the finance business.